Portfolio Updates and Other Such Nonsense

Hey, it’s been almost two months now. I bet you kids are just JONESING FOR MORE NELSON.

(Crickets chirp and a tumbleweed slowly goes by)

Or not.

The interwebs is very much a place where you can just quietly go way and nobody gives a crap. I retired from Motley Fool about a month ago and two people cared enough to mention it. Two! I’ve never felt more disposable.

I have a real job now, and it’s great. Co-workers are fun when you’ve gone without for a few years. I like working with people towards the same goal. I really missed that.

But enough about my personal life. It’s time for a bunch of thoughts on some different subjects. ARM THE RANDOMNESS CANNON.

New portfolio position

I think Alberta is a great place to search for undervalued stocks today. The economy will eventually recover, bringing up earnings of Alberta-centric companies up with it.

Gamehost Inc. (TSX:GH) is one such company. It owns and operates three different casinos in the province, with locations in Grande Prairie, Fort McMurray, and Calgary. Earnings peaked in 2014 at $0.95 per share, falling to $0.66 per share in 2016. Keep in mind 2016’s results were temporarily low because of the Fort McMurray fire.

I paid just over $9 per share for my position, meaning I got in for less than 10x peak earnings. I believe the company grows earnings in 2017, since they’ve already come out and said both Grande Prairie and Fort McMurray are looking strong. Calgary is the weak market today, but the city will eventually recover. Oil always swings back. It’s just a matter of time.

And while I wait, the company pays a generous 7.6% yield.

Gamehost has other things going for it value investors typically like. Insiders own approximately 40% of shares outstanding. It has a solid balance sheet. Management did cut the dividend, but that was to free up capital to put to work buying back shares. And since Alberta’s economy is in the shitter, there’s little chance of any new casinos opening anytime soon.

Aimia

I bought a bunch of Aimia (TSX:AIM) shares in 2016, enticed by the company’s strong free cash flow and what I thought was a no-brainer choice for Air Canada to renew the contract.

I guessed wrong, and I’m now down a cool 75% on Aimia. Yeah, that stings.

I’m not entirely convinced Aimia will end up insolvent, although I do admit that’s a very real possibility. I like the company’s other assets, including the 50% stake it has in AeroMexico’s loyalty program. I suspect that will get sold and the proceeds applied to debt.

There’s also the possibility of another company buying Aimia, whether it’s the parent company of Air Miles (Alliance Data) or one of its bank partners. There’s zero possibility of Air Canada buying the company back, at least in my opinion.

The Aimia debacle pretty much erases my big win with Canam a couple of months ago. Oh, investing. You have a special way to keep a guy humble.

Home Capital and Buffett

Anything that fucks over Marc Cododes, the short-seller who declared Home Capital was a gigantic fraud at every possible opportunity, is fine by me. Short all you want, but don’t be an asshole about it.

I don’t see what attracted Buffett to Home Cap, but the reaction on Financial Twitter (or FinTwit) was delightful. I’m 80% certain Warren did the deal just to lurk and LOL at everyone’s reaction.

You still can’t convince me to touch Home Capital, however. I’m staying far away from that turd. Genworth MI Canada (TSX:MIC) looks a little more interesting, but it’s too expensive today. I might sniff when it falls back to $30ish. Or I might nope out of anything related to Canadian housing. That seems like the safer bet.

Other interesting stocks

I like Inter Pipeline (TSX:IPL) at anywhere under $25 and Altagas (TSX:ALA) under $30. I think both are solid businesses that will succeed over the long-term. Neither are particularly cheap, but they’re the kinds of companies that never get truly inexpensive.

I once bought Inter Pipeline under $10 a share and then sold at $20 per share, collecting a sweet dividend along the way. The company has increased both cash flow and the dividend since, a trend I think continues over time.

I’m down a bit on recent portfolio additions High Liner Foods (TSX:HLF) and Information Services Corp (TSX:ISV). I think both are solid businesses you want to own over the next decade or so, and would buy more once I add a little more capital to my portfolio.

Fairfax Financial (TSX:FFH) is also looking pretty interesting at right around book value. Not having to pay a premium to have Prem Watsa in your corner is nice.

And finally, if you’re into energy stocks, I think both Cenovus (TSX:CVE) and Baytex (TSX:BTE) look interesting here. I’d be much more inclined to buy the former, but the latter comes with more upside potential.

That’s about it, kids

12 Comments

Rod
on June 22, 2017 at 2:20 pm

My favourite Alberta centric stock is Dream Unlimited. It has 10,000 acres of undeveloped urban land in Alberta and Saskatchewan. Also a large stake in Dream Office, which has assets in Alberta as well. The stock has been punished by this exposure, but I think it’s an excellent business. Sells close to book value, which is a gross underestimate of intrinsic value given that their land is held at historical cost and they have several businesses that don’t fully show up on the balance sheet. A big one is the asset management business, another is the Arapahoe Basin ski hill in Colorado, which is carried at a small fraction of its value.

My “Oilberta” play is Northview. It’s still being valued like an Alberta REIT and in the meantime, I’m paid a nice dividend to hold it.

The Buffett deal is interesting. I won’t touch HCG either but will keep an eye on it. One thing to keep in mind is that even Buffett gets it wrong (ie. Dexter Shoes and more recently, IBM), but he gets it right far more than he gets it wrong. I personally think he got it right in this case provided the RE market doesn’t completely crash but I’ll cheer him from the sidelines.

Aww, we missed you too. So are you allowed to say what made the mighty Nelson settle for a real job? I think we’d all be interested in an article detailing the pros and cons of self employment online vs regular employment.